The U.S. Treasury sold $16 billion in 20-year bonds on Wednesday, but demand was weak as investors worried about Congress debating a tax and spending bill that is expected to worsen the fiscal outlook, thus increasing the U.S. debt burden.
The yield on the bonds auctioned reached 5.047%, about one basis point higher than the trading level before the auction. Indirect bidders (including governments, fund management companies, and insurance companies) purchased 69% of the bonds, above the average level, indicating that foreign demand remains strong. Overall demand was slightly below average, at only 2.46 times the debt offered for sale, the lowest level since February 2023.
The yield on the 20-year bonds rose to 5.127% after the auction, the highest level since November 2023.
This auction was met with a tepid response, leading to sell-offs in the stock market and the dollar, while U.S. Treasury yields rose, indicating that investors' concerns over the country's expanding debt are intensifying, which may alarm bond market watchers hoping for more fiscal restraint from Washington.